The global science and technology landscape is changing rapidly. Knowledge-intensive production and trade account for increasing shares of global output and are closely related to country and regional investment in S&E education and in R&D activity (Chapter 2 and Chapter 4 provide information on S&E higher education and R&D activity). While the United States and the EU continue to be leading global producers in many knowledge-intensive industries, the production and assembly of many high-technology goods have shifted to the developing world, particularly in China, where ICT and pharmaceutical manufacturing have become large shares of global production. Exports of high-technology products are centered in Asia, where China accounts for 24% of global exports, but smaller nations such as Vietnam are expanding rapidly. Although this production activity often represents the final phase of the global supply chain, where components designed or produced in other countries are transformed into final products, there is increasing evidence that China is moving from final assembly into higher-value activities, including R&D and manufacture of sophisticated products. Overall, the United States is the largest producer of high-technology manufacturing output with China being the largest global producer in the ICT manufacturing industries. China is by far the world’s largest global producer in medium-high-technology industries. In commercial knowledge-intensive services (such as banking, finance insurance, R&D services), the United States and the EU lead in the volume of output while China is growing rapidly and now the third largest producer.

China is the world’s largest global exporter in high-technology manufactured products and the second largest in medium-high-technology products. China has substantial trade surpluses in most of these products. However, conventional trade statistics likely exaggerate China’s position because China’s exports contain substantial content supplied by other countries, including the United States. China’s exports of commercial knowledge-intensive services are growing rapidly and are in surplus.

The United States continues to have a strong competitive position in some technology-based industries. The United States remains the global leader in commercial knowledge-intensive services, which include many sophisticated industries such as R&D and civil engineering. The commercial knowledge-intensive industries account for nearly a fifth of global economic activity. The United States is the global leader in the high-technology manufacturing industries of aerospace and scientific measuring and control instruments. U.S. KTI industries have grown robustly compared to weak or negative growth of the EU and Japan following the global recession. Despite the strong recovery of U.S. KTI output, gains in employment have been limited and confined to commercial knowledge-intensive services.

The United States has a weaker position than other major economies in trade of technology-intensive goods. The United States is the world’s third and fourth largest exporter of high-technology and medium-high-technology goods, respectively, and has substantial trade deficits in most of these goods. In high-technology goods, the United States remains the world’s largest exporter of aerospace products and has a substantial surplus. However, conventional trade statistics likely overstate the weakness of the United States because U.S. exports of sophisticated intermediate goods to China and other countries are not included in the value of U.S. exports.

In sustainable energy research and technology, the United States is the global leader in attracting early-stage investment and is the largest investor in public RD&D in these technologies. Large-scale public investment in RD&D is important because many sustainable energy research and technology require costly large-scale testing and demonstration plants that are too risky for the private sector to finance entirely. The EU and Japan are major investors in public RD&D. China is the leading recipient of commercial-scale private investment and is leading the world in increasing its renewable energy capacity. In addition, China is the world’s largest solar manufacturer and is a major wind manufacturer.